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TMI Blog2019 (7) TMI 237X X X X Extracts X X X X X X X X Extracts X X X X ..... tion dated 08.04.2018 filed by the Applicant No. 1 to the Standing Committee on Anti-Profiteering under Rule 128 of the CGST Rules, 2017. The Applicant No. 1 had stated in his application that the Respondent had resorted to profiteering in respect of supply of construction services related to purchase of Flat No.A5/907 in his project Solera-2 situated at Sector-107, Gurugram, Haryana. The Applicant No. 1 had claimed that as per the Affordable Housing Policy-2013 (AHP) of the Haryana Government, the basic sale price of the above flat in the pre-GST regime was fixed as Rs. 4000/- per square foot (sq. ft.) which was required to be recalibrated after implementation of the CST by passing on the additional benefit of Input Tax Credit (ITC) which had become available to the Respondent. The Applicant No. 1 had also supplied copies of the demand letters issued by the Respondent and of the correspondence exchanged between the Applicant No. 1 and the Respondent on this issue. The above application was considered by the Standing Committee on Anti-Profiteering in its meetings held on 07.08.2018 and 08.08.2018 and it was recommended to the DGAP for conducting detailed investigation. 2. The DGAP ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d now become available as ITC to the suppliers was not used by them but passed on to the recipients by commensurate reduction in the prices. The Respondent had also claimed that the reduction in price could only occur if the goods or services were already in existence and available for supply during the pre-GST period and hence the anti-profiteering provisions could not be applied in respect of a product or service which was not in existence prior to the coming in to force of the GST and was supplied for the first time in the post-GST period as there had to be a pre-GST reference price for reducing the price. The Respondent had further submitted that the flats which had not been sold or even booked during the pre-GST regime and the construction of which had commenced much after the implementation of the GST, were not liable to price reduction under the anti-profiteering provisions. The Respondent had also claimed that as per the press release issued by the Central Board of Indirect Taxes & Customs (CBIC) on "reduced liability of tax on complex, building, flats under the GST", the anti-profiteering provisions could only apply to those goods and services which were earlier supplied b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im on 11 08 2017 vide Cheque No. 004057 dated 11.08.2017 and the flat was allotted to him on 20.11.2017 on the basis of the draw of lots. The Respondent had further claimed that the above Applicant was fully convinced that since the price charged for the above flat pertained to the new project to be developed and constructed by the Respondent after implementation of the GST, the anti-profiteering provisions would not be applicable, as stated by the DGAP in his Report. 5. The DGAP had also contended that the anti-profiteering provisions would not apply to the project Solera-2 as it was not in existence before the implementation of the GST and was started after coming in to force of the GST. The DGAP had further contended that the Respondent had also stated that the draw of lots for selection of the allottees had taken place on 16.1 1.2017, although the Applicant No. 1 had made payment of security deposit on 11.08.2017, however, the unit was allotted to him only on 20.11.2017 and hence, all the events had taken place during the post-GST period and there was no sale or even booking of the flats in the pre-GST regime. The DGAP had also submitted that after scrutiny of the documents su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dingly, the Report dated 30.10.2018 was referred back by the Authority vide its order dated 14.12.2018 to the DGAP for further investigation under Rule 133 (4) of the CGST Rules, 2017 on the ground that nothing had been discussed in the Report regarding ITC aspect and the impact of GST rate reduction on the affordable housing projects from 18% to 12 % w.e.f. January, 2018. In compliance of the order dated 14.122018 the DGAP has furnished a fresh Report dated 29 03.2019 which has been received on 01.04.2019, as per the provisions of Rule 133 (4) of the above Rules, in which he has submitted that all the events pertaining to the above project viz. advertisement for the project launch pre- booking payments, draw of lots, allotment of units and receipt of the entire payments etc. had taken place in the post-GST period and there was no sale or even booking of the flats in the pre-GST period and hence, there was no pre GST tax rate and ITC which could be compared with the post-GST tax rate and the ITC. He has also submitted that the provisions of Section 171 (1) of the CGST Act, 2017 were only attracted when there was reduction in the rate of tax or increase in the benefit of ITC. He has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buyers were entitled to get the benefit of ITC. The Applicant No. 1 has also quoted the directive dated 07.02.2018 issued by the Ministry of Finance in which the builders were asked not to charge any GST from the buyers of houses under the AHP as the effective GST rate on such projects was 8% which could be adjusted against the ITC as sufficient ITC was available to pay the output GST and the builders were not required to pay the GST on the construction services. The Applicant No. 1 has also claimed that the GST Council had clarified definition of the ongoing projects as those projects where the construction and the actual booking had started before 01.04.2019 but which would not be completed by 31.03.2019. He has further claimed that the GST Council in its meeting held on 19.03.2019 had permitted the developers to choose between the old tax rates and the new tax rates on or before 10.05.2019 for the under construction residential projects so that the ITC issues could be settled. He has also contended that if the developers opted for the new tax rates, they would have to pay 1% GST on the construction of affordable houses and 5% GST on all other housing projects without ITC and if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Revenue {Tax Research Unit) vide F. No. 354/32/2019-TRU dated 14.05.2019, had clarified that no additional GST was required to be paid if a buyer had booked an apartment prior to 01.04.2019 and paid part consideration to the developer, if the developer decided to opt for the new scheme for the ongoing project. He has also stated that from the instances given by the CBIC, it was clear that whatever the developer was getting towards the ITC it should be passed on to the home buyers if the developer decided to opt for the old scheme for the ongoing projects as the definition of on-going project had already been clarified by the CBIC. The Applicant No. 1 has also claimed that the Solera-l and the Solera-2 were one and the same project in the same premises and there was no question of Solera-2 being a different project from the Solera-1 project. He has further claimed that the Respondent had launched his new project in the 1st week of this month at Sector 37-D, Gurugram for which the Respondent could not charge more than Rs. 4000/- per sq. ft.+1% GST. The Applicant No. 1 has also queried whether the Respondent would get the construction material at cheaper rates for the new project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited & others v. State of Karnataka & others [(2013) 65 VST 1 (SC) =2014 1 SCC 708] = 2013 (9) TMI 853 - SUPREME COURT in which it was held that "The activity of construction undertaken by the developer etc. would be work contract only from the stage he entered into a contract with the flat purchaser." The Respondent has also submitted that as the allotment of the flats was made on 20.11.2017 and the agreements between the Respondent and the buyers were executed on 13.12.2017 and the construction activities had commenced w.e.f. 14.01.2018, after obtaining environment clearances from the competent authority on 09.01.2018, all the above events had taken place during the post-GST period. The Respondent has further submitted that the transaction between the builder & the buyers was covered by clause (b) of paragraph 5 of Schedule II of the CGST Act, 2017 from the date the buyer was allotted the flat on 20.11.2017 or from the date of signing of the Builder-Buyer agreement on 13.12.2017 whichever was earlier. The Respondent while referring to the Notification No. 03/2019-Central Tax (Rate) dated 29.03.2019 which amended the Notification No. 11/2017- Central Tax (rate) dated 28.06.2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first ITC was taken in the post-GST regime on 28.07.2017. He has also filed an affidavit for non availment of the ITC during the pre-GST period. 15. We have carefully considered the DGAP's Report and the written submissions filed by both the Applicant No. 1 and the Respondent which have been placed on record and find that the following issues are required to be settled in the present proceedings:- I. Whether there was reduction in the rate of tax on the construction services as alleged by the Applicant No. 1 ? II. Whether there was benefit of additional ITC available to the Respondent which was not passed on by him to the Applicant No. 1 ? III. Whether there was any violation of the provisions of Section 171 (1) of the CGST Act, 2017 by the Respondent? 16.Perusal of the record reveals that the Respondent had got Affordable Housing Solera-2 project approved under the Haryana AHP and invited applications for allotment of houses vide advertisement given in the Times of India on 24.07.2017. The Applicant No. 1 had applied for allotment of a flat and paid the security deposit vide Cheque No. 004057 dated 11.08.2017 which was encashed on 18.08.2017. The draw of lots for allo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 2017 and after 01.07.2017 to determine whether the Respondent had benefitted from additional availability of ITC or not. The Respondent through his sworn affidavit has also claimed that he had not availed benefit of ITC during the pre-GST period and he had availed the same on 28.07.2017 after coming in to force of the GST. From the above facts it is established that there has been no additional benefit of ITC to the Respondent and hence he was not required to pass on its benefit to the above Applicant by reducing the price of the flat. The Applicant No. 1 could have availed the above benefit only if the above project was under execution before coming in to force of the GST as the Respondent would have been eligible to avail ITC on the purchase of goods and services after 01.07.2017 on which he was not entitled to do so before the above date. Since there was no basis for comparison of ITC available before and after 01.07.2017, the Respondent was not required to recalibrate the price of the flat due to additional benefit of ITC. Hence, the allegations of the Applicant made in this behalf are incorrect and therefore, the same cannot be accepted. 17. The above Applicant has also cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directive dated 07.02.2019 in his support. However, perusal of the same shows that it is only a press statement issued after the meeting of the GST Council held on 18.01.2018 and its impact will have to be considered on the basis of facts of each case. On the basis of the facts of the present case it is clear that there had been no additional benefit of ITC to the Respondent and hence he is not required to pass on its benefit. The above Applicant has also quoted the reply given on FAQ No. 16 by the CBIC in his support perusal of which shows that it pertains to the clarification given on the reduced rates of tax on the construction services which have come in to force w.e.f. 01.04.2019. Since, the Respondent has opted to continue with the old tax rate of 8% the above clarification does not apply in the present case and any claim made on this ground by the above Applicant is untenable. 21. The Applicant No. 1 has also contended that the Respondent had opted to charge GST @ 8% and hence he should pass on the benefit of ITC to him @ 8% and there was no logic in paying GST at the above rate when he could have paid it @ 1%. This claim of the above Applicant is unreasonable as the Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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